Labor Law Challenges for Your Construction Business

Understand common liability issues to avoid pricey penalties.

Due to remote, unsupervised working locations, changing work sites, regular travel and industry regulations, the nature of the construction industry exposes contractors to risks for lawsuits and administrative claims from disgruntled employees. To steer clear of liability issues, construction business owners must be aware of numerous compliance areas.

Timekeeping Procedures

Both federal and state laws require employers to keep accurate timekeeping records. State laws may also contain additional requirements. Many construction workers use handwritten time records, and they do not include detailed information about their working hours. Some employers provide their employees with electronic timekeeping (through cell phones), but this method can become inaccurate due to intermittent cell phone coverage.

Generally, wages must be paid at least twice each month. Every hour an employee works has to be accounted for and paid, including travel time (except for the commute to the first and last location).

Your timekeeping records should follow several technical requirements. For instance, rounding errors can result in significant amounts of unpaid time if the rounding works against employees over a period of time. All hours worked must be paid over the course of time, but rounding can be used in increments up to the nearest 15 minutes.

You must also provide pay statements with paychecks, which should contain the necessary information required by law. And you should keep time records (for the amount of time required by federal, state and local laws) in a central and easily accessible location.

Regardless of the timekeeping method used, supervisors, dispatchers and office management should regularly review their time records each pay period.

To preserve your business and remain competitive, you must catch errors before they accumulate into significant deviations from the legal requirements.

Reporting Time Violations

Some states, such as California, have reporting time regulations—if employees are called to work but are turned away before working at least half the day’s scheduled work, they are entitled to half their pay or a minimum of two hours pay at the employee’s regular rate.

Some collective bargaining agreements also place restrictions on minimum pay for reporting to work.

The nature of construction makes scheduling difficult since work is often dependent on circumstances beyond an employer’s control. Regardless, an employer should strive to minimize scheduling errors. If a schedule change is necessary, employers should call employees at home to prevent expenses from incurring.

Meal and Rest Period Compliance

All construction management personnel should be intimately familiar with state meal and rest period laws and any exemptions from those laws. Complying with these laws can be difficult, especially in California, where the law states, “No employer shall employ any person for a work period of more than five (5) hours without a meal period of not less than 30 minutes….”

In California, for each day employers fail to provide employees with a meal period or rest period, they must pay a self-executing premium (now treated as a wage by the courts) of one hour of pay at the employee’s regular hourly rate during the pay period when the violation occurs. Other states regulating meal or rest periods have similar sanctions for noncompliance. To avoid paying penalties, you must provide meal or rest periods according to the applicable state law, and you should adopt documentation methods that show the provided breaks.

Prevailing Wage Pitfalls

All construction business owners should be extremely familiar with state and federal prevailing wage laws for public works. Special requirements may apply that cannot be waived with a side agreement. Federal or state agencies typically determine the wage rates, and the prevailing wage requirements may include special recordkeeping requirements, benefit provisions and overtime rates.

Reimbursement Policies

Some states, like California, require an employer to reimburse or indemnify an employee for all expenses and losses “necessarily incurred” during the course of employment. This includes many areas that employers may overlook, such as furnishing hand tools or providing mileage reimbursement for travel other than ordinary commuting to and from work.

Many problems occur in this area when construction employers treat their employees as independent contractors. One common test for independent contractor status is whether the contractors must provide their own tools and equipment. However, this requirement would be unlawful in those states that require an employee to be compensated for such expenses.

In states requiring a reimbursement, employers should establish written policies that include reasonable standards for expenses allowed and not allowed. Employers who provide an expense allowance should have a documentation system to show the necessary reimbursement.

Employment Agreements

Many disagreements arise when the type of employment is not clarified. For example, some employers who claim to have independent contractor agreements cannot satisfy the requirements for independent contractor status, and their records often contain references to employment rather than an independent contract arrangement. If the worker is actually an employee, then a host of regulations will apply that protect employees, including overtime compensation and other benefits.

Before a worker begins employment, a clear agreement must be created that establishes the method of pay (hourly, piece rate, commission pay or other pay formulas). The agreement should be in writing and provide compensation for all hours worked.

When terminating employment, the agreement should provide the procedures necessary for properly accounting the final wages due. Deductions generally should be authorized in writing by the employee in question. Some states have special protections for what can and cannot be deducted from an employee’s final wages.

Employers should take the necessary time to systemize and regulate their hiring and termination policies to avoid future issues.

Construction Business Owner , November 2011

About the Author

John K. Skousen is a partner at the Irvine, Calif. office of the employment law firm, Fisher & Phillips LLP. Skousen’s specialized practice area includes wage and hour law and class-action litigation.